Lupin shares rose over 6 per cent on BSE on Thursday after brokerage Kotak Securities double upgraded the pharma firm to ‘add’.
KIE’s bullishness over Lupin stems from the drugmaker’s strong US portfolio which makes it well-poised to surprise positively on Street’s estimates in the US in FY25 and FY26.
Factoring that in, the brokerage also raised its price target for Lupin by nearly 30 per cent to Rs 1,805, reflecting the potential for an upside of around 11 per cent from the previous close. This is despite the over 88 per cent gains delivered by the stock in the last one year.
Kotak believes that Lupin has a bunch of products lined up, which will ensure a limited earnings dip in FY27 after a strong FY26 despite baking in a sharp decline in Albuterol sales over the next couple of years.
Kotak expects Lupin’s robust US sales trajectory to continue amid a stable US generics pricing environment, despite declines in Albuterol and Suprep in FY25. Even though Spiriva and Albuterol, will still remain critical contributors to Lupin’s earnings in FY25 and FY26, the brokerage feels it will be Myrbetriq and Tolvaptan, that will make the next fiscal remarkable for the drugmaker. Tolvaptan is expected to be launched in the first quarter of FY26.
The report added that gMyrbetriq and Tolvaptan will be key to driving LPC’s US sales in FY25E and FY26E, respectively. Particularly aided by the Tolvaptan launch in April 2025, FY2026 will be a noteworthy year in the US for LPC. Accordingly, a healthy 12 per cent YoY and 11 per cent YoY growth in US sales in FY25E and FY26E, respectively, for LPC, it said.
Shares of Lupin surged more than 5.22 per cent to Rs 1,714.10 during the trading session on Thursday, commanding a total market capitalization of more than Rs 78,000 crore. The scrip had settled at Rs 1630.80 in the previous trading session on Wednesday.
“We have factored in an incremental hit for LPC’s Albuterol sales from Amphastar’s expected launch in 2QFY25 as well as likely launch by Amneal in 2HFY25. Similar to Albuterol, there has not been any impact of the ceiling on OOP costs for inhalers on gSpiriva’s pricing and market share as yet,” Kotak said.
“With $1.2 billion US sales reported by Otsuka as of CY2023 and LPC’s 180-day sole exclusivity from April 2025, we believe the opportunity from Tolvaptan in FY26E will be much above Street’s estimates. Even after the exclusivity, we expect Tolvaptan to remain a relatively low competition product with Teva, Apotex and Sun being the other known Para IV filers,” it said.
Shares of Lupin have nearly tripled in the last two years from Rs 610-levels in June 2022, zooming nearly 180 per cent. The stock has gained nearly 100 per cent in the last one year. The stock is up 30 per cent in 2024 so far.
Kotak raised FY25-27E EPS by 3-16 per cent on higher US sales and Ebitda margins, 370 bps expansion over FY2024-26E. It believes there is still a possibility of further positive surprises if LPC continues to gain share in gSpiriva as well, if there is lower-than-expected hit from Albuterol competition.
“We now ascribe a June 2026E PE multiple of 25X (22X earlier) owing to a better medium-term sales as well as margin outlook, lower in-licensed mix in India to also help with Empagliflozin being the only drug to see a patent expiry over the medium term” it added with a double upgrade to ‘add’ from ‘sell’ with a revised face value of Rs 1,800 from Rs 1,405 earlier.
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